Fed officials who don’t see signs of inflation haven’t been watching loan prices. As credit markets healed over the last two years, investors saw loans behave in a recovery as they were designed to. Default rates fell and recovery rates rose, proving the asset class could withstand a hundred year flood and come out barely moist. Three months after Lehman failed loan prices in the secondary market reached a record low of 65 cents on the dollar. At the time, no one knew whether a bottom had been reached. Anxiety reigned and markets had no clear guidance on a path to recovery.
“The food in this place is really terrible,” one elderly woman complains to her friend at a Catskill mountain resort. “Yeah, I know,” replies the other one, “and such small portions.” That’s where investors find themselves today in the broadly syndicated market. With leverage up and spreads falling, deal quality is eroding. Yet thanks […]
I’ve lived in Boulder for 15 years after living in Boston for a dozen. While I’ve spent a lot of time in Silicon Valley — both as an angel and venture capital investor — I’ve never lived there. While the firm I’m a partner in — Foundry Group — invests all over the United States, […]
As anyone trying to get a mortgage these days knows, leverage isn’t what it used to be. The Great Deleveraging, begun in late 2007 as the credit crunch took hold, affected the entire corporate and consumer financial services community. Debt became a four-letter word, thanks to the unmasking of sub-prime mortgages as the true villain of the era. Those no-income-no-equity loans took leverage to its theoretical extreme, coming to represent all that’s bad about structured credit and securitization. The carnage it brought to Main and Wall also made it impossible to appreciate all the benefits – liquidity, low cost, diversification of risk – of those off-balance sheet financings.
“My, what big teeth you have, grandma!” exclaims Little Red Riding Hood in the beloved, eponymous fairy tale. “All the better to eat you, my dear!” declares the Big Bad Wolf, before devouring Little Red Hiding Hood and running off into the woods. Over the last few months, investment bankers have been eagerly reaching out to corporate buyers at the large public technology companies, as their burgeoning balance sheets have grown large enough to cause even a sangfroid, buttoned-down banker to salivate. For example, the eight US-based technology companies with market capitalizations of over $100 billion (Apple, Microsoft, Google, IBM, Oracle, Cisco, Intel and HP) are sitting on over $200 billion in cash and short-term investments. Throw in the top three healthcare firms by market capitalization (J&J, Pfizer and Amgen) and the figure is $250 billion. Further, each of these companies is in a strong competitive position, competing in markets with positive secular trends thanks to the burst of innovation that is ahead of us. I can’t cite another time in the brief 50 years history of the technology industry when so many US-based companies were in such strong global leadership positions in so many compelling, growing markets.
Are middle market senior lenders really back? Newspapers and industry publications say they are. You hear of certain private equity funds that claim they’ve been accessing senior debt. You may even get calls from some lending officers offering their wares. Yet for all the hoopla that senior lending has returned, we believe that senior debt for middle market companies (defined as those with EBITDA less than $50.0 million) is still limited and only available to the best credits. Yes, there is an ample supply of asset based senior debt. Obtaining senior debt based upon collateral values is now easier than it has been in several years and some asset based lenders are even starting to offer overadvances, something unheard of even six months ago.
Investors are paying attention to loans as an asset class today for three reasons. First, default levels and price volatility coming out of the Great Recession returned to normal way faster than anyone anticipated. Second, the scare of defaults and volatility convinced portfolio managers that being at the top of the capital stack as a […]
Writing a book is hard. Really hard. Much harder than I thought. So I’m extra satisfied that “Do More Faster: TechStars Lessons to Accelerate Your Startup” is finished, in print and available for the world to buy. I’ve been helping create software and Internet companies for over 25 years, starting with my first company, Feld […]
Fall is officially here and for many diehard fans we’re happy to be in the midst of football season once again. For me, it means rooting for the Steelers and trying to get the weekly picks in on time. But for 27 million others, it means fantasy football. I have never quite understood the fantasy […]
Last week’s column got more reaction than any since our On The Left newsletter began publication two and half years ago. Who knew everyone has a meatloaf story? The best was from a friend of the firm who told us he couldn't believe any mother would foist a faux loaf on her children. "My mother would never have done that!" He was so upset that he called his own mother in Miami to relate his outrage. "You're right, dear," she told him, "my meatloaf was always the real thing." Brief pause. "But you never asked about my tuna casserole."